Theses and Dissertations

Issuing Body

Mississippi State University


Kelly, Wayne

Committee Member

Roskelley, Kenneth D.

Committee Member

Hill, Matthew

Committee Member

Highfield, Michael J.

Committee Member

Campbell, Randall C.

Date of Degree


Document Type

Dissertation - Open Access



Degree Name

Doctor of Philosophy (Ph.D)


College of Business


Department of Finance and Economics


“What determines bond ratings?” has been asked since 1860 when Henry V. Poor, of now Standard & Poors, released his first financial and operational analysis of the railroad industry and is still asked today. The determinants of bond rating studies date back to Fisher (1959) and single out various industries (railroad, manufacturing, industrial, and utility) but do not focus on REITs. REITs are different from other industries in various ways. Literature suggest differences between REITs and non-REIT industries including: the regulatory IRS restrictions regarding REITs, the uncertainty regarding the value of REITs, the number of uninformed investors is greater in the REIT market due to valuation uncertainty, REITs securities behave more like mutual fund securities than like industrial firm securities (Wang et al. (1992), (1995)), and the uncertainty about the value of real estate stocks is greater than that for stocks of industrial firms with operating assets, causing REIT advisors to complain that the stock market underestimates their real value more often than the real value of industrial firms (Hite, Owens, and Rodgers (1987)). This study analyzes the determinants of REIT debt ratings. The determinants are analyzed using ordered probit and multinomial logit regression models. The results of the ordered probit regression model reveal that REIT debt ratings are determined by similar financial characteristics used to analyze determinants for non-REIT industries. Similar to the findings in Horrigan (1966), the data also reveals that liquidity is not as significant to REIT debt ratings as S&P analyst claim. The multinomial logit resuts show that leverage, cash, size, interest coverage, and shareholders right plan are significant to downgrades. Overall, the findings presented here are consistent with non-REIT ratings literature.